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Autumn Budget 2017 – A Tech Perspective

The Chancellor used his Autumn Budget speech to provide some insight into the governments’ strategy for digital technology and how the UK intends to lead the world in this area. A white paper on its Industrial Strategy will be published in the next few days providing much more detail, but for now, the key tech-related headlines are:

Increase in investment for R&D of £2.3bn and increase in the main rate of R&D tax credit from 11% to 12% with effect from 1 January 2018. There will also be a new “Advanced Clearance Service” for R&D expenditure tax credit claims. This extends the service that has been available to SMEs since 2015.

As part of a drive to improve access to finance for innovative firms, the Chancellor announced the establishment of a £2.5bn incubator Investment Fund. This to be run by the British Business Bank and used for co-investment with the private sector, with the aim of unlocking up to £7.5bn of investment.

Through the British Business Bank there will be an additional investment of up to £4bn for investment into the private sector.

£160m investment in new 5G infrastructure plus a further £35m investment for trials aimed at improving mobile communications for rail passengers.

EIS and VCT allowances for individuals doubled for knowledge-intensive businesses to encourage investment, as well as the amount of annual investment those companies can receive through EIS and the VCT scheme.

Tech City UK to receive investment of £21m over the next four years to become “Tech Nation”, with the creation of regional hubs and a dedicated sector programme for the likes of AI and FinTech.

UK Games Fund to receive an additional £1m extending the funding until 2010 to aid access to funding and business support for early stage video game developers.

Change in immigration rules to enable world leading talent to apply for settlement after three years. This is designed to make it easier for university students to apply for settlement upon finishing their degrees. There will also be a relaxation of the labour market tests.

Making Tax Digital – as legislated earlier this year, no business will be required to use MTD until April 2019 and then only for VAT and if they breach the VAT threshold.

The creation of a world first advisory body focused on the adoption of AI to enable and ensure safe, ethical and ground-breaking innovation in this area. If you believe what Elon Musk says then this is surely to be welcomed, although how far their remit will stretch and how effective it will be remains to be seen. The government have also announced that they will fund 450 PhD researchers with a new “AI Fellowship” in a move to try and secure the UK’s leading position in the global AI market.

Taking a broader look at the tax system and the digital economy, the government has also published a “positional paper” on how multinationals are taxed, starting with the overriding belief that profits should be taxed in the countries in which value is generated. This builds on the work already done as part of the OECDs BEPS project and states that they believe further action is needed. In recognition of this, from April 2019 withholding tax obligations will apply to royalty payments to low or no tax jurisdictions “in connection” with sales to UK customers. It is unclear how this is to be applied but is estimated to raise an addition £200m of tax, suggesting that its application may not be as wide as it could be.

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